deCODE genetics Announces Second Quarter 2009 Financial Results
The financial results presented below reflect deCODE's strategic focus onutilizing its leadership in human genetics to develop and commercializeDNA-based risk assessment tests, personal genome scans, and intellectualproperty. deCODE is pursuing various options aimed at underpinning andadvancing product development and commercialization in this core business.One likely component of this effort is the sale of some or all of deCODE's USmedicinal chemistry and structural biology units. Although these unitscontinue to operate and contribute to deCODE, in view of their prospectivesale the company has accounted for these businesses as "discontinuedoperations." With the exception of combined net loss figures, the operatingresults discussed below are thus all for deCODE's continuing operations inits core business of employing the company's capabilities in gene discoveryto advance DNA-based diagnostics, personal genome analysis, intellectualproperty licensing opportunities, and contract genotyping. The results ofoperations and related cashflows from deCODE's US operations, and for thecompany's core and US operations combined, for the three and six-monthperiods ended June 30, 2009 and 2008, are broken out in the table at the endof this presentation.
Net loss for the quarter ended June 30, 2009 was $12.1 million, comparedto $17.6 million for the second quarter 2008. Net loss for the first sixmonths of 2009 was $24.3 million, compared to $43.6 million for the first sixmonths of last year. Figures for both 2008 periods include non-operatinglosses resulting from the revaluation of auction rate securities (ARS) thenheld by the company. Basic and diluted net loss per share was $0.20 and $0.39for the second quarter and first six months of 2009, respectively, comparedto $0.29 and $0.71 for the same periods last year. At June 30, 2009, thecompany had approximately 61.8 million shares outstanding. For continuing anddiscontinued operations combined, net loss for the quarter ended June 30,2009 was $13.1 million, compared to $18.4 million for the second quarter2008. Net loss for the first six months of 2009 for combined operations was$25.8 million, compared to $45.0 million for the first six months of lastyear. Basic and diluted net loss per share for combined operations was $0.21and $0.42 for the second quarter and first six months of 2009, respectively,compared to $0.30 and $0.73 for the 2008 periods.
Revenue for the second quarter 2009 was $3.5 million, versus $9.0 millionfor the second quarter last year. Revenue for the first half of 2009 was $7.6million, compared to $18.1 million for the first half 2008. These figuresreflect the impact of lower year-on-year contract service revenues. At June30, 2009, the company had $21.3 million in deferred revenue, to be recognizedover future reporting periods, including the upfront payment from the Celerapartnership signed in April.
Research and development expense for proprietary programs was $2.8million for the second quarter of this year, compared to $8.0 million for thesame period last year. For the first six months of the year, research anddevelopment expense was $6.9 million in 2009 and $20.6 million in 2008.Selling, general and administrative expenses were $4.3 million for the secondquarter 2009, compared to $5.9 million for the second quarter 2008, and $8.6million for the first half 2009 versus $11.7 million for the first half oflast year. These figures reflect the company's current focus on controllingcosts in its core genetics activities creating intellectual property andnovel content for its diagnostic tests, deCODEme scans, and outlicensingopportunities, as well as costs related to the restructuring of the company.
At June 30, 2009, the company had cash and cash equivalents of $3.8million, compared to $3.7 million at December 31, 2008. In early 2009 thecompany sold its ARS for approximately $11.0 million in cash, and in Aprilthe company signed licensing agreements with Celera Corporation under whichit received an upfront payment and will receive royalties on sales of Celeratesting products and services incorporating deCODE genetic risk markers. Thecompany believes it has sufficient resources to fund operations only into thelatter half of the third quarter. It is simultaneously pursuing severaloptions to ensure sufficient funding to take it to the execution of strategicoptions that can support the near- and longer-term viability of its corebusiness.
"As the focus of our healthcare system shifts toward prevention,measuring and controlling individual risk of disease will become a centralpart of everyday medicine. DNA-based risk assessment tests and personalgenome scans such as those we have developed offer a novel and personalizedmeans of more accurately gauging risk. The goal of our strategic review is torecast deCODE as a diagnostics company positioned to lead in this growing newmarket. Over the past quarter we have made our gene discovery engine moreefficient, and shown that it continues to be second to none in delivering thecontent required to create effective genetic risk tests for common diseases.We are also advancing our strategic negotiations on several fronts, includingthe sale of our US medicinal chemistry and structural biology units; findingbuyers or licensing partners to take forward our therapeutics programs;additional licensing deals for our intellectual property and diagnostictests; and securing new equity financing. All of these are steps towards thesame goal: to provide the company with the operating structure and financialmeans to advance a product portfolio that we believe will play an importantrole in improving healthcare," said Kari Stefansson, CEO of deCODE.
deCODE is a biotechnology company developing DNA-based tests to assessindividual risk of common diseases and to improve prevention, diagnosis andtreatment. deCODE is a global leader in human genetics, and has identifiedkey variations in the genome (SNPs) conferring increased risk of major publichealth challenges from cardiovascular disease to cancer. Based upon thesediscoveries deCODE has brought to market a growing range of DNA-based testsfor understanding risk and empowering prevention. Through its CLIA-registeredlaboratory, deCODE offers deCODE T2(TM) for type 2 diabetes; deCODE AF(TM)for atrial fibrillation and stroke; deCODE MI(TM) for heart attack; deCODEProstateCancer(TM) for prostate cancer; deCODE Glaucoma(TM) for a major typeof glaucoma; and deCODE BreastCancer, for the common forms of breast cancer.Through its chemistry and biology units deCODE has also developed atherapeutic product portfolio, which includes DG041, an antiplatelet compoundbeing developed for the prevention of arterial thrombosis; DG051, a compoundtargeting the leukotriene pathway for the prevention of heart attack; andDG071 and a platform for other PDE4 modulators with therapeutic applicationsin Alzheimer's disease and other conditions. The company intends to partneror directly outlicense these programs. Visit us on the web athttp://www.decode.com; on our diagnostics site athttp://www.decodediagnostics.com; for our pioneering deCODEme(TM) personalgenome analysis service and focused deCODEme Cardio(TM) and deCODEmeCancer(TM) scans at http://www.decodeme.com; and on our blog athttp://www.decodeyou.com. deCODE is delivering on the promise of the newgenetics.SM
Conference Call Information
A conference call, during which deCODE CEO Kari Stefansson and CFO LanceThibault will discuss the past quarter's financial results and operatinghighlights, will be webcast tomorrow, Tuesday, August 11, at 8:00am EDT/12noon GMT/1pm BST. The webcast can be accessed via the Investors section ofdeCODE's website, http://www.decode.com, or through http://www.earnings.com.A replay of the call will be available on these websites for at least oneweek following the call. A digitized telephone replay of the call can beaccessed for the week following the call by dialing 1-800-475-6701 from theUS, or +1-320-365-3844 from outside the US. The access code is 111342.
* Other non-operating expense for the three and six months ended June 30,2009 and 2008 principally reflect an unrealized loss resulting from therevaluation of the company's non-current auction rate security investmentsand for the three and six months ended June 30, 2009 offset by foreigncurrency translation gains.
Any statements contained in this presentation that relate to futureplans, events or performance are forward-looking statements within themeaning of the Private Securities Litigation Reform Act of 1995. Theseforward-looking statements are subject to a number of risks and uncertaintiesthat could cause actual results, and the timing of events, to differmaterially from those described in the forward-looking statements. Theserisks and uncertainties include, among others, those relating to our abilityto obtain sufficient financing to continue as a going concern, our ability todevelop and market diagnostic products, the level of third partyreimbursement for our products, our ability to form collaborativerelationships, the effect of government regulation and the regulatoryapproval processes, market acceptance, our ability to obtain and protectintellectual property rights for our products, dependence on collaborativerelationships, the effect of competitive products, industry trends and otherrisks identified in deCODE's filings with the Securities and ExchangeCommission, including, without limitation, the risk factors identified in ourmost recent Annual Report on Form 10-K and any updates to those risk factorsfiled from time to time in our Quarterly Reports on Form 10-Q or CurrentReports on Form 8-K. deCODE undertakes no obligation to update or alter theseforward-looking statements as a result of new information, future events orotherwise.Recent operating highlights include: Corporate and Product Development - Celera. In April, deCODE entered into agreements with Celera Corporation under which it has granted Celera non-exclusive worldwide licenses to deCODE's genetic markers for increased risk of major cardiovascular and metabolic diseases, including heart attack, stroke, atrial fibrillation (AF) and type 2 diabetes (T2D). Celera plans to incorporate them into risk assessment and testing services offered by its subsidiary Berkeley HeartLab, and deCODE will receive royalties on sales of tests and services utilizing its markers. - deCODE AF(TM). The company continued to expand the predictive power and clinical utility of its reference laboratory test for measuring risk of atrial fibrillation (AF) and stroke. Last month, deCODE scientists published the discovery of another common single-letter variation (SNP) in the sequence of the human genome conferring risk of AF and stroke. More than a third of people of European descent carry at least one copy of this new SNP on chromosome 16, putting them at more then 20% greater risk of AF and stroke than non-carriers. - Gene discovery. deCODE continues to reinforce its global leadership in the discovery of genetic risk factors for common diseases. In June, a deCODE team presented several new common SNPs linked to risk of skin cancer, three of which appear to confer risk through underlying mechanisms that are not modulated by sensitivity to the UV radiation in sunlight. These variants were integrated into the deCODEme(TM) and deCODEme Cancer(TM) scans, and one in particular, located in the keratin 5 gene, may make a promising drug target. In another study, deCODE scientists discovered a SNP on chromosome 21 that modulates risk of both kidney stones and osteoporosis. As both conditions are related to dysfunctional calcium metabolism, this finding may mark a new pathway for drug discovery. deCODE has also led the largest ever study of the genetics of schizophrenia, and, last month, the deCODE team and colleagues from the SGENE consortium published the discovery of several novel common SNPs linked to increased risk of the disease. - CAP Certification. Supporting the company's efforts to broaden the marketing and reimbursement of its DNA-based risk assessment tests, deCODE's CLIA-registered DNA isolation and genotyping laboratory has been accredited by the American College of Pathologists (CAP). The laboratory processes the company's deCODEme(TM) personal genome scans and risk assessment diagnostic tests. The US Centers for Medicare and Medicaid Services (CMS) has granted the CAP Laboratory Accreditation Program deeming authority, and its accreditations can also be used to meet many state certification requirements. Finance - Nasdaq Global Market reinstatement. In June, the listing of deCODE's common stock was reinstated to the Nasdaq Global Market. The reinstatement followed the Nasdaq Hearing and Listing Review Council's reversal of a decision in February by the Nasdaq Listing Qualifications panel under which the listing of deCODE's common stock was transferred to the Nasdaq Capital Market. Subsequent Events - On July 30, 2009, deCODE's stockholders approved the increase in deCODE's authorized shares of common stock from 150,000 to 1,150,000 and also approved the amendment of its Amended and Restated Certificate of Incorporation to allow for a reverse stock split at the discretion of deCODE's Board of Directors. These steps position the company to bring in new equity investment and to renegotiate its debt.
SOURCE DeCODE Genetics Inc
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